Today's Key Issues (time in GMT):
12:00 CAD CPI, % m/m (y/y) Nov exp: 0.3 (0.8) prev: -0.1 (0.1) 15:00 USD Philadelphia Fed mfg index Dec exp: 16.0 prev: 16.7 15:00 USD Leading indicators, % m/m Nov exp: 0.7 prev: 0.3
The Risk Today:
EurUsd After failing to climb back above 1.4600 (hitting 1.4590) we saw short term wave 4 come to an end before wave 5 has taken the pair to the major support level at 1.4360. This level is also the lower range of the new downtrend so if short sellers are looking to book some profits pre- weekend / Christmas, then this is a highly likely place for them to do it before undergoing a choppy sideways action higher. IF we drop out of the bottom of the channel then the longer term target of EURUSD 1.3500 will be in play, but for now we advise cutting some EURUSD shorts and waiting for the re-entry, ideally at 1.4684. The prior support at 1.4515 has now become resistance so expect it provide a hurdle in the meantime.
GbpUsd GBPUSD finally looks to have broken out of its one month bearish channel, as Retail Sales data quickly prompted a collapse through 1.6200 levels to breach the lower end of the channel at 1.6166. A close below 1.6166 opens up a move towards 1.6000-1.6040 area, and for now, good supply at 1.6200 should cap any rallies.
UsdJpy The pair has continued on its 3-week uptrend since bottoming at 84.81 in 27th Nov, topping at 90.26 in early Asian trading today. Long positions are still favored with bids coming in at 89.50, and resistance at 90.86 (coinciding with 9 month downtrend line) plus resistance at 91.80.
UsdChf On Tuesday we said that we were probably still in wave 3 of 5 and that 1.0360 would attract longs in the short term. That scenario has played out perfectly, confirming the wave counts, and tells us that we are now likely in wave 5 of 5 and accompanied by some increasingly divergent momentum indicators. Wave 5’s can be a great place to make some big bucks and fast – our October gold trade from 1006 to 1188 is a typical example – but in this case the divergences are a concern for me and I would now wait for a meaningful correction of this entire 5 wave move.
Resistance and Support:
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot